BARRIER OPTION PRICING BY BRANCHING PROCESSES

Barrier Option Pricing by Branching Processes

Svetlozar T. Rachev Chair-Professor, Chair of Statistics, Econometrics and Mathematical Finance, School of Economics and Business Engineering, University of Karlsruhe and KIT, Kollegium am Schloss, Bau II, 20.12, R210, Postfach 6980, D-76128, Karlsruhe, Germany and Department of Statistics and Applied Probability, University of California, Santa Barbara, and Chief-Scientist, FinAnalytica Inc. E...

Barrier Option Pricing

This thesis examines the performance of five option pricing models with respect to the pricing of barrier options. The models include the Black-Scholes model and four stochastic volatility models ranging from the single-factor stochastic volatility model first proposed by Heston (1993) to a multi-factor stochastic volatility model with jumps in the spot price process. The stochastic volatility ...

Numerical algorithm for discrete barrier option pricing in a Black-Scholes model with stationary process

In this article, we propose a numerical algorithm for computing price of discrete single and double barrier option under the emph{Black-Scholes} model. In virtue of some general transformations, the partial differential equations of option pricing in different monitoring dates are converted into simple diffusion equations. The present method is fast compared to alterna...

Asymmetric Jump Processes: Option Pricing Implications

Option Pricing with Selfsimilar Additive Processes

The use of time-inhomogeneous additive processes in option pricing has become increasingly popular in recent years due to the ability of these models to adequately price across both strike and maturity with relatively few parameters. In this paper we use the property of selfsimilarity to construct two classes of models whose time one distributions agree with those of prespecified Lévy processes...